Neutral impactEconomy
Robust inflows into FCNR (B) deposits: Banking system liquidity surplus at ₹6.65 lakh cr
BusinessLine 1 hr ago·1 Sept 2026, 4:23 pm
India's banking system is currently flush with cash, with a surplus liquidity of ₹6.65 lakh crore. This massive inflow is largely driven by Foreign Currency Non-Resident (Banks) (FCNR(B)) deposits, which have seen robust growth. To manage this excess liquidity, the Reserve Bank of India (RBI) recently conducted two Variable Rate Reverse Repo (VRRR) auctions totaling ₹10 lakh crore.
This situation is significant for the broader market as it indicates a strong flow of foreign capital into the country. High liquidity generally supports the rupee and can keep short-term interest rates stable. However, it also means banks have ample funds to lend, which could potentially ease credit conditions for businesses and individuals.
Investors should watch the RBI's future actions to gauge how long this surplus will persist. If the central bank continues to absorb funds via VRRR auctions, it signals a deliberate effort to control liquidity. Conversely, a sudden reduction in these auctions could lead to a spike in liquidity, which might impact short-term bond yields.
Excerpt from BusinessLine
Thanks to the robust inflows into FCNR (B) deposits during the June 8, 2026 to August 31, 2026 period under the RBI’s concessional swap facility, the banking system is currently awash with liquidity, with the surplus at last count (August 31, 2026) at a whopping ₹6.65 lakh crore. To absorb this surplus, the RBI on…Read the original at BusinessLine
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